Argentine President Cristina Fernandez de Kirchner meets with French President Francois Hollande at the Elysee Palace in Paris last month. / Christophe Ena, AP

by Richard Wolf, USA TODAY

by Richard Wolf, USA TODAY

WASHINGTON - Few tears will be shed for Argentina at the Supreme Court next week, when unpaid debts from its record-setting 2001 default come under legal scrutiny. But its creditors aren't likely to evoke much sympathy, either.

Billions of dollars are at stake in the 13-year-old battle that has followed Argentina's $82 billion default - at the time, the largest government default in history. The South American nation's opponents range from state pension funds to the families of victims of terrorism.

The government of Cristina Fern√°ndez de Kirchner, however, has foreign nations such as France, Mexico and Brazil on its side, as well as a very powerful U.S. ally in the Obama administration. What's at stake from the U.S. point of view is nothing less than international relations and the avoidance of retaliation.

The case to be heard at the high court Monday could be just a precursor of a bigger one. The justices first will ponder whether creditors who refused to take about 25 cents on the dollar for their bonds can track down Argentina's assets around the world. The creditors' ultimate goal is to collect - and that will require another case, which the court has yet to accept.

Argentina has been playing a losing hand for years in federal courts in New York. Although the Foreign Sovereign Immunities Act of 1976 was intended to protect sovereign nations from U.S. courts, district and appeals judges have ruled that the holdout creditors can go after Argentine assets and should be treated the same as creditors who accepted the country's restructured debt.

But the Supreme Court's willingness to hear the case could signal an Argentinian rebound - particularly since the funds that bought the country's distressed debt at discount and held out for full restitution, referred to as "vulture funds," are viewed unfavorably by the State Department.

"Judicial seizure of a foreign state's property may be regarded as a serious affront to the state's sovereignty and affect our foreign relations with it," the U.S. government argues in its brief backing Argentina. A ruling against the sovereign nation, it says, "would risk reciprocal adverse treatment of the United States in foreign courts."

THE HEDGE FUND'S CASE

At the root of the complaint filed by NML Capital, the Cayman Islands hedge fund suing Argentina, is a basic fact: It's owed more than $1.5 billion, and it wants the money.

The only reason Argentina attracted U.S. investors originally was by waiving immunity from U.S. courts and promising equal treatment to all bondholders, NML argues - pledges that are being reneged on now.

In its view, Argentina is a G-20 nation with adequate funds to pay all of its creditors - those who took the restructuring deals of 2005 and 2010, and the holdouts who refused. The assets, NML says, are being hidden.

What's more, NML says it's been willing to negotiate for years, but Argentina has refused any contact. The country's lawyers have told lower courts it would refuse to abide by any rulings against it.

"The reality is that Argentina is a completely irresponsible government," says John Baker, professor emeritus at Louisiana State University Law Center. "They have taken a very rich country and destroyed it financially. ‚?¶ Without the discipline of having to be responsible to somebody, there's never any hope of change down there."

The fund points out that its investors aren't vultures; they include charities, universities and state pension funds. And it points toward its allies in court, such as relatives of terrorism victims seeking to recover from countries they deem responsible.

A brief filed on behalf of relatives of 9/11 victims and others says the court's ruling will affect their chances of collecting damages from "sovereign states that routinely and brazenly seek to evade responsibility for the catastrophic injuries they have inflicted through acts of terrorism."

And states, led by South Carolina, that hold more than $5 billion in foreign government debt say a ruling for Argentina means those investments "will be seriously jeopardized - and state budgets may be severely impacted as a result."

ARGENTINA'S RESPONSE

Argentina's defense hinges on the Foreign Sovereign Immunities Act, the law intended to shield foreign governments from the overreach of U.S. courts.

The argument goes something like this: The 2001 default and subsequent debt restructurings were necessary to keep the country afloat. Shut out of many capital markets and beset by high costs of borrowing, the nation is unable to help its own impoverished citizens.

"The foundation of this court's sovereign immunity jurisprudence is that foreign states are entitled to 'grace and comity' in U.S. courts, which is premised on respect for the power, dignity and absolute independence of foreign sovereigns," its brief states.

The Argentine government has gone so far as to pass a law forbidding loan repayments to vulture funds. But lower courts have blocked payments to other creditors as a result, prompting Argentina to file a new petition with the Supreme Court - and hire uber-litigator Paul Clement, a former U.S. solicitor general, to oppose his predecessor, Theodore Olson, who is representing NML Capital.

"Argentina could never possibly pay all the creditors," says Ross Buckley, professor of international finance and regulation at the University of New South Wales Law School in Australia. Because countries aren't allowed to declare bankruptcy, he says, their only options other than debt restructuring are astronomical tax increases and draconian cuts in services.

Those steps "become obscene when the country is sufficiently poor," Buckley says. "The cost doesn't fall on the elite. It falls on the common people."